Cars in Chapter 7 Bankruptcy
Filing for bankruptcy does not mean you have to lose everything, such as your house and your car. Chapter 7 bankruptcy provides for certain exemptions, or laws that protect property up to a certain amount. The DuPage County Chapter 7 bankruptcy attorneys at the Bankruptcy Center of Illinois are prepared to help you apply all exemptions that help you hold onto your vehicle. Together, we will explore all options, including surrendering a vehicle, which may make sense in certain situations. Our dedicated lawyers work with you to make an informed decision regarding your car under Chapter 7 Bankruptcy.Cars in Chapter 7 Bankruptcy
Filing for Chapter 7 Bankruptcy is a method to discharge or relieve your debts. If you own a car, or make car payments, you may be curious if you can keep your vehicle after you begin the bankruptcy process. First, it is important to note that if you are behind on your car loan, then it will be challenging to retain your vehicle.
Exemptions provide a way to keep property required to work and maintain a household. All nonexempt property must be relinquished in Chapter 7 bankruptcy. The trustee sells nonexempt property in order to repay unsecured creditors. However, exempt property cannot be sold to pay a creditor. Therefore, if your vehicle is exempt, it cannot be sold.
The types of exemptions that protect a vehicle include the motor vehicle exemption as well as the wildcard exemption. A wildcard exemption protects certain types of property, up to a specific amount. It may be added to a motor vehicle exemption to protect the equity in your car. A skilled attorney can help to ensure that you have applied all possible exemptions to retain your vehicle.Applying Exemptions to Protect Cars in Chapter 7 Bankruptcy
The motor vehicle exemption may cover the equity in a vehicle, and in that case the trustee cannot sell your car. If you have unprotected equity, your vehicle may be sold and you would be provided the exemption amount. The remaining amount would then be distributed to your creditors.
First, you must determine the amount you can protect with a motor vehicle exemption. You also need to determine the value of your vehicle. The “current'' value of the vehicle is the amount it would sell for, taking into consideration its condition and age. This is also known as the fair market value. You can look at industry standards but it is also important to consider factors that may reduce the car’s value. If you own a unique vehicle, it may be wise to rely on a licensed appraiser.
After establishing the value of the car, you can determine the equity you have. If you own the vehicle, then the equity is the value. An example would be a vehicle worth $1,5000 and equity worth $1,500.
If you do not own the car outright, the equity is the leftover amount if you sold the car and paid it off. An example is a car sold for $8,000 and a $4,000 loan balance. You would walk away with $4,000 after selling the car, and that is the equity. If you owe the amount that the car is valued, that means you have “zero” equity. And if the car is worth even less than you owe, you have negative equity.
A trustee may take other actions in your Chapter 7 bankruptcy case. They may opt to let you purchase the vehicle. You would negotiate a deal with the trustee and likely pay the amount of money the creditors would receive, minus anticipated sales costs. In other situations, the trustee may abandon the vehicle. This is likely the scenario if, after selling the vehicle, money is unlikely to be available.Consult a DuPage County Bankruptcy Attorney and Work to Resolve Debt
Chapter 7 bankruptcy can help if you are facing overwhelming debt. By contacting an experienced DuPage County bankruptcy lawyer at the Bankruptcy Center of Illinois, you can learn more about how to protect your assets, including your motor vehicle. Our office serves clients throughout Illinois, including localities such as Cook County, DuPage County, and Lake County. Call us at (773) 993-0024 or contact us online to set up a complimentary consultation.